You are here

BHP Billiton takes US$2.8b pre-tax writedown as oil price tumbles

Mining giant BHP Billiton on Wednesday said it was taking a US$2.8 billion pre-tax writedown on its onshore assets in the United States as plunging oil prices hit shale gas.

PHOTO: REUTERS

[SYDNEY] Mining giant BHP Billiton on Wednesday said it was taking a US$2.8 billion pre-tax writedown on its onshore assets in the United States as plunging oil prices hit shale gas.

The Anglo-Australian company said the gas-focused Hawkville field at its Eagle Ford operations in south Texas would account for most of the charge, reflecting its geological complexity, product mix, acreage relinquishments and changed development plans.

The remainder stems from an impairment of goodwill from its US$12.1 billion takeover of the Petrohawk Energy Corporation in 2011.

BHP said it expected to book a writedown of US$2 billion post-tax or approximately US$2.8 billion pre-tax in its 2015 financial year results.

Shares in the miner fell 1.70 per cent to A$26.64 in early Wednesday trade.

"While the impairment of the Hawkville is disappointing, it does not reflect the quality of our broader onshore US business," BHP's petroleum president Tim Cutt said in a statement.

"With industry-leading drilling costs and recoveries, we are well positioned to realise significant value for shareholders as we develop our high-quality resource base." The world's biggest miner said it would invest US$1.5 billion in its onshore US assets in the 2016 financial year to support the development of 10 operated rigs.

BHP in January cut back its operating US shale oil rigs by 40 per cent as prices weakened.

US benchmark West Texas Intermediate for August delivery gained 84 US cents at US$53.04 a barrel on the New York Mercantile Exchange after Iran's nuclear deal with six world powers Tuesday.

World oil prices collapsed by 60 per cent between June 2014 and January when it hit a low of US$45, hurt by a global supply glut.

While Opec on Monday revised upward its forecast for global crude oil demand growth for this year, it said that crude output would also continue to increase.